Royal Group in talks with China, Indonesia on proposed oil pipeline

Cambodian conglomerate the Royal Group is in talks with two foreign state-owned petroleum companies to conduct feasibility studies for an oil pipeline that would run from Sihanoukville to Phnom Penh, a government official has confirmed.

Meng Saktheara, secretary of state at the Ministry of Mines and Energy, said the Royal Group was engaged in discussions to develop Cambodia’s downstream capabilities via a pipeline.

He said the company had recently been approached by a state-owned Chinese company and Pertamina, an Indonesian state-owned oil and natural gas corporation.

Pertamina representatives visited Cambodia last week to discuss possible ways to export petroleum products to the Kingdom, according to Saktheara.

Meanwhile, a source close to the project’s talks confirmed that Royal Group chairman Kith Meng met visiting representatives of China Pipeline Bureau, the pipeline arm of state-owned China National Petroleum Corporation, on March 31, to discuss a proposed route for an oil pipeline.

Saktheara said that while details of the closed-door meeting were sparse, the two companies were aiming to determine if a pipeline project would be economically viable.

“Both companies have shown interest in investing in downstream capabilities,” he said. “This includes building an oil refinery plant and the Kingdom’s first pipeline, as well as an electricity-generating plant.”

One route likely under consideration for the pipeline would follow the existing “Southern Line” railway from Sihanoukville to Phnom Penh, a total length of 254 kilometres.

In 2009, Royal Group subsidiary Royal Railway received a 30-year concession to operate rail services in Cambodia. The company lays claim to five to ten metres on each side of the tracks – sufficient room to accommodate a pipeline, and without opening any new potentially troublesome land rights issues.

Saktheara said the companies involved must study the proposed pipeline plan’s details first and then propose a project to the government.

“At the same time, the government is also preparing a policy and master plan on how to make downstream capabilities sustainable and competitive,” he said.

While Saktheara said downstream investment was new to Cambodia, both the private and public sector need to collaborate to make sure a pipeline does not poise environmental risks. He added that while there was potential to develop downstream capabilities, it was just a matter of investment.

The Royal Group declined to comment, and the size or detail of any investment remains unclear.

Nevertheless, Danish petroleum expert Tommy Christensen, CEO of Go4 Bunker Cambodia, said that any strategic pipeline decisions made by the Cambodian government would need to be both technically and commercially viable to succeed.

He added that an oil pipeline does not yet appear to be a high priority as it had not been allocated under the national budget.

“[A pipeline] is unlikely to happen out of this consortium, but one might within 10 to 15 years,” he said adding that the project should be a Cambodian state-owned development to mitigate risks in the volatile energy sector.

Christensen said among the advantages a pipeline would have over transporting oil by road and rail would be better public safety and the decreased likelihood that shipments between Sihanoukville and Phnom Penh would be siphoned off or stolen.

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